How Equity Release Scheme Life Time Mortgages Are Different and Which Calculator Shows the Risks

Life Time Mortgages are designed to provide income, a lump sum or a combination of both, by releasing the money locked up in your home. This is commonly known as ‘Equity Release’ Equity is the amount of money left over from the value of your home after a mortgage and any secured loans have been paid. Therefore if your home is worth £150,000 with an outstanding mortgage of £50,000 the equity is £100,000.

A normal life time mortgage will enter a first charge on the property so any existing charge would need to be cleared, often through the new life time loan.

The Lifetime Mortgage company’s legal charge, mortgage terms and conditions such as ensuring a building insurance policy is in place are the same as a normal mortgage. In this context, the lender has certain rights, such as the right to inspect the property with Age calculator reasonable notice. Also the lender can ensure that the borrower maintains the property and carries out necessary repairs. If the owner does not carry out these obligations, the equity release company has the authority to carry out any remedial work and invoice the borrower.

Unlike a conventional fixed term mortgage for 25 years that consists of capital and interest repayments, a life time mortgage is open ended with no specific term. So the loan is only repaid on the sale of the property, often as a result of the demise of the last surviving homeowner in the case of a couple or entering long term residential care. Equity release life time mortgages are more suitable for older age groups and minimum ages vary between 55 to age 65. In the case of a couple, the loan is based on the younger age. Maximum ages may be between 90 and 95 years.

Life time loans are usually interest only whereby the original amount advanced is repaid when the property is sold. A roll up loan adds interest to the original capital so the outstanding balance continuously increases leaving less for beneficiaries. A good way to assess the potential reduction in your equity (value) is to access a special equity elease calculator that forecasts the risk to your equity. This amazing tool enables you to assess the possible future impact of the rising loan against your increasing property value. The system allows you to enter unlimited assumptions of average house price increases when you have also entered in the loan details provided by your equity release unbiased specialist.